Sounds sensible in theory, and may well prove to be just that, but I’ve heard of such arrangements eventually becoming untenable because of dementia. Among other other factors the person can no longer understand that they should stay in their own home much of the time, not to mention losing all sense of time, and endlessly knocking or ringing the doorbell at all times of the day and night.
The other thing to be aware of is the possibility of care home fees being needed later. If there would still be enough money to pay for them, no problem, but if not, and the local authority would have to pay, there could be a question of deprivation of assets.
LAs are understandably very hot on this - i.e your money has been used to provide a valuable addition to an adult child’s home. They won’t care that this was not the original purpose of the exercise. They can and do require the money to be repaid.
Plus, the addition/annexe cannot then be sold separately to fund care. It may of course be rented out, but any such income would be unlikely to cover more than a small part of care home fees.
Sorry to point out negatives, but they are things to bear in mind.